House panel approves tax incentives for forest plantation

THE House Committee on Ways and Means has approved various tax incentives being proposed for persons engaged in forest plantation activities.

The tax incentives were outlined in the substitute bill on Sustainable Forest Ecosystems Management Act approved earlier by the Committee on Natural Resources chaired by Rep. Francis Matugas (1st District, Surigao del Norte) and subsequently referred to the Ways and Means Committee.

Rep. Hermilando Mandanas (2nd District, Batangas), Committee Chairman, said panel members have no objection to the proposed tax incentives.

The system of incentives aims to encourage qualified persons, natural or juridical, to engage in forest management activities. The incentives shall be granted as provided for by existing laws such as the National Internal Revenue Code, as amended, and Executive Order 226 or the Omnibus Investment Code, among other laws.

Among the approved incentives is that expenses incurred in complying with the requirements of the Sustainable Forest Ecosystems Management Act shall be allowed as deductible expenses for income tax purposes subject to the provisions of the NIRC. The deduction shall only apply to the taxable period when the expenses were incurred.

There shall also be exemption from the payment of forest charges, and that amounts expended by the agreement holder in the development and operation of a forest plantation prior to the commercial harvest shall be regarded as ordinary and necessary expenses or as capital expenditure.

The agreement holder shall also be given priority to access credit assistance being granted by government-owned, -controlled and –supported financial institutions.

The Board of Investments (BOI) shall classify forest plantations as pioneer and preferred areas of investment under its annual priority plan subject to the pertinent rules and regulations.

Lastly,  the bill provides that  upon the premature termination of the agreement at no fault of the holder, all depreciable permanent and semi-permanent improvements such as roads, buildings and nurseries, including planted and standing trees and other forest crops introduced and to be retained in the area, shall be properly evaluated and the holder shall be entitled to a fair compensation, the amount of which shall be mutually agreed upon both by the Department and the agreement  holder, and in case of disagreement between them, by arbitration through a mutually acceptable and impartial third party adjudicator.

The proposed Sustainable Forest Ecosystems Management Act aims to sustainably manage forest ecosystem all over the country that are continuously generating various ecosystem services to society, mitigating climate change and enabling various sectors to adapt to climate change impacts, providing economic benefits, and helping local
communities and indigenous peoples in reducing poverty through active cooperation and collaboration among stakeholders.

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